I'm not an expert, or even a knowledgeable in this particular area, so this is just a guess.

If PR1.2 includes new kernel stuff, the update probably flashes over whatever kernel is installed. Then it wouldn't matter what you've done previously with the kernel.

But if PR1.2 doesn't include a new kernel, ie if it uses the PR1.1.1, I doubt the update would flash a new kernel in conjunction with the update process. This can lead to issues if PR1.2 isn't compatible with any changes a modified kernel, like Lehto's or Titan's overclocked ones, has.

The safest thing to do is flash the original kernel back before updating. Just in case.